UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
--------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to_____________
Commission file number 0-14007
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MCNEIL REAL ESTATE FUND XX, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0050225
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (972) 448-5800
-----------------------------
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
MCNEIL REAL ESTATE FUND XX, L.P.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- --------------
ASSETS
- -------
Real estate investments:
<S> <C> <C>
Land..................................................... $ 392,000 $ 392,000
Buildings and improvements............................... 3,903,427 3,882,558
-------------- -------------
4,295,427 4,274,558
Less: Accumulated depreciation.......................... (1,410,186) (1,290,949)
-------------- -------------
2,885,241 2,983,609
Mortgage loan investments, net of allowance of
$792,013 at December 31, 1997............................ 2,251,665 3,268,712
Mortgage loan investments - affiliate, net of allowance
of $130,000 at December 31, 1997......................... - 3,600,076
Cash and cash equivalents .................................. 6,334,552 1,824,293
Cash segregated for security deposits....................... 26,305 27,405
Interest and other accounts receivable...................... 27,866 140,025
Escrow deposits............................................. 107,846 162,652
Deferred borrowing costs, net of accumulated
amortization of $68,188 and $60,222 at June 30,
1998 and December 31, 1997, respectively................. 93,306 101,272
Prepaid expenses and other assets........................... 4,200 4,200
-------------- -------------
$ 11,730,981 $ 12,112,244
============== =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage note payable, net.................................. $ 2,640,692 $ 2,666,814
Accounts payable and other accrued expenses................. 35,167 61,994
Accrued property taxes...................................... 77,938 137,050
Payable to affiliates....................................... 288,409 203,444
Deferred revenue............................................ 3,863 27,229
Security deposits and deferred rental revenue............... 27,840 29,494
-------------- -------------
3,073,909 3,126,025
-------------- -------------
Partners' equity (deficit):
Limited partners - 60,000 limited partnership units
authorized; 49,512 limited partnership units issued
and outstanding at June 30, 1998 and
December 31, 1997...................................... 8,942,005 9,282,684
General Partner.......................................... (284,933) (296,465)
-------------- -------------
8,657,072 8,986,219
-------------- -------------
$ 11,730,981 $ 12,112,244
============== =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Revenue:
<S> <C> <C> <C> <C>
Rental revenue ............... $ 309,192 $ 327,275 $ 646,880 $ 657,911
Interest income on mortgage
loan investments ............ 69,284 62,495 138,780 130,252
Interest income on mortgage
loan investments - affiliate - 15,305 108,214 30,442
Other interest income ........ 62,949 32,747 85,112 69,800
Gain on extinguishment of
mortgage loan investment .... 1,025,833 - 1,025,833 -
---------- ---------- ---------- ----------
Total revenue ............. 1,467,258 437,822 2,004,819 888,405
---------- ---------- ---------- ----------
Expenses:
Interest ..................... 60,994 61,844 122,298 123,975
Depreciation ................. 59,792 59,437 119,237 145,024
Property taxes ............... 41,046 44,820 77,938 89,239
Personnel costs .............. 33,277 35,600 74,074 77,462
Utilities .................... 19,950 20,023 40,175 39,639
Repairs and maintenance ...... 28,402 19,482 57,278 69,308
Property management
fees - affiliates ........... 15,038 16,597 30,032 32,823
Other property operating
expenses .................... 15,583 18,241 36,292 46,274
General and administrative ... 114,765 21,680 163,200 56,464
General and administrative -
affiliates .................. 66,726 67,178 131,126 131,935
---------- ---------- ---------- ----------
Total expenses ............ 455,573 364,902 851,650 812,143
---------- ---------- ---------- ----------
Net income ...................... $1,011,685 $ 72,920 $1,153,169 $ 76,262
========== ========== ========== ==========
Net income allocable
to limited partners .......... $1,001,568 $ 72,190 $1,141,637 $ 75,499
Net income allocable
to General Partner ........... 10,117 730 11,532 763
---------- ---------- ---------- ----------
Net income ...................... $1,011,685 $ 72,920 $1,153,169 $ 76,262
========== ========== ========== ==========
Net income per limited
partnership unit ............. $ 20.23 $ 1.46 $ 23.06 $ 1.52
========== ========== ========== ==========
Distributions per limited
partnership unit ............. $ - $ - $ 29.94 $ 15.15
========== ========== ========== ==========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity (Deficit)
-------------- -------------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996.............. $ (318,863) $ 10,315,277 $ 9,996,414
Net income................................ 763 75,499 76,262
Distributions to limited partners......... - (749,994) (749,994)
------------- ------------- -------------
Balance at June 30, 1997.................. $ (318,100) $ 9,640,782 $ 9,322,682
============= ============= =============
Balance at December 31, 1997.............. $ (296,465) $ 9,282,684 $ 8,986,219
Net income................................ 11,532 1,141,637 1,153,169
Distributions to limited partners......... - (1,482,316) (1,482,316)
------------- ------------- -------------
Balance at June 30, 1998.................. $ (284,933) $ 8,942,005 $ 8,657,072
============= ============= =============
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Cash received from tenants ................... $ 682,464 $ 674,778
Cash paid to suppliers ....................... (399,169) (361,511)
Cash paid to affiliates ...................... (76,193) (192,710)
Interest received ............................ 220,723 207,023
Interest received from affiliate ............. 184,958 24,443
Interest paid ................................ (110,294) (112,663)
Property taxes paid .......................... (281) (19,644)
Property taxes escrowed ...................... (81,300) (61,600)
----------- -----------
Net cash provided by operating activities ....... 420,908 158,116
----------- -----------
Cash flows from investing activities:
Additions to real estate investments ......... (20,869) (43,923)
Collection of principal on mortgage loan
investments ................................ 50,880 67,528
Proceeds from payoff of mortgage loan
investment ................................. 1,992,000 -
Collection of principal on mortgage loan
investments - affiliate .................... 9,126 -
Proceeds from payoff of mortgage loan
investments - affiliate .................... 3,570,896 -
----------- -----------
Net cash provided by investing activities ....... 5,602,033 23,605
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage note payable... (30,366) (27,996)
Distributions to limited partners ............ (1,482,316) (749,994)
----------- -----------
Net cash used in financing activities ........... (1,512,682) (777,990)
----------- -----------
Net increase (decrease) in cash and cash
equivalents ................................. 4,510,259 (596,269)
Cash and cash equivalents at beginning of
period ....................................... 1,824,293 3,188,257
----------- -----------
Cash and cash equivalents at end of period ...... $ 6,334,552 $ 2,591,988
=========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net income .................................... $ 1,153,169 $ 76,262
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ............................... 119,237 145,024
Amortization of deferred borrowing costs ... 7,966 7,473
Amortization of discount on mortgage note
payable .................................. 4,244 4,029
Gain on extinguishment of mortgage
loan investment .......................... (1,025,833) -
Changes in assets and liabilities:
Cash segregated for security deposits .... 1,100 17,776
Interest and other accounts receivable ... 112,159 2,159
Escrow deposits .......................... 54,806 59,688
Prepaid expenses and other assets ........ - (2,313)
Accounts payable and other accrued
expenses ............................... (26,827) (57,219)
Accrued property taxes ................... (59,112) (61,362)
Payable to affiliates .................... 84,965 (27,952)
Deferred revenue ......................... (3,312) (3,312)
Security deposits and deferred rental
revenue ................................ (1,654) (2,137)
----------- -----------
Total adjustments ...................... (732,261) 81,854
----------- -----------
Net cash provided by operating activities ..... $ 420,908 $ 158,116
=========== ===========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent public accountants.
See accompanying notes to financial statements.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
Notes to Financial Statements
June 30, 1998
(Unaudited)
NOTE 1.
- -------
McNeil Real Estate Fund XX, L.P. (the "Partnership"), formerly known as
Southmark Income Investors, Ltd., was organized on July 19, 1984 as a limited
partnership under the provisions of the California Revised Uniform Limited
Partnership Act. The general partner of the Partnership is McNeil Partners, L.P.
(the "General Partner"), a Delaware limited partnership, an affiliate of Robert
A. McNeil ("McNeil"). The principal place of business for the Partnership and
the General Partner is 13760 Noel Road, Suite 600, Dallas, Texas 75240.
In the opinion of management, the financial statements reflect all adjustments
necessary for a fair presentation of the Partnership's financial position and
results of operations. All adjustments were of a normal recurring nature.
However, the results of operations for the six months ended June 30, 1998 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1998.
NOTE 2.
- -------
The financial statements should be read in conjunction with the financial
statements contained in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1997, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XX, L.P., c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.
NOTE 3.
- -------
Certain prior period amounts have been reclassified to conform with the current
period presentation.
NOTE 4.
- -------
The Partnership pays property management fees equal to 5% of the gross rental
receipts for its properties to McNeil Real Estate Management, Inc. ("McREMI"),
an affiliate of the General Partner, for providing property management services.
Under the terms of its partnership agreement, the Partnership pays a disposition
fee to an affiliate of the General Partner equal up to 3% of the gross sales
price for brokerage services performed in connection with the sale of the
Partnership's properties, provided, however, that in no event shall all real
estate commissions (including the disposition fee) paid to all persons exceed
the amount customarily charged in similar arms-length transactions. The fee is
due and payable at the time the sale closes. The Partnership incurred $124,500
of such fees during 1997 in connection with the sale of 1130 Sacramento
Condominiums. This amount represents 2.65% of the gross sales price. These fees
have not yet been paid by the Partnership and are included in payable to
affiliates on the Balance Sheets at June 30, 1998 and December 31, 1997.
<PAGE>
The Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs.
The Partnership is paying an asset management fee which is payable to the
General Partner. Through 1999, the asset management fee is calculated as 1% of
the Partnership's tangible asset value. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization rate
of 9% to the annualized net operating income of each property, (ii) a value of
$10,000 per apartment unit or (iii) on 1130 Sacramento, the net book value of
the property is used to arrive at the property tangible asset value. The
property tangible asset value is then added to the book value of all other
assets excluding intangible items. The fee percentage decreases subsequent
to 1999.
Compensation and reimbursements paid to or accrued for the benefit of the
General Partner and its affiliates are as follows:
Six Months Ended
June 30,
---------------------
1998 1997
Property management fees .............. $ 30,032 $ 32,823
Charged to general and administrative -
affiliates:
Partnership administration ......... 55,101 55,744
Asset management fee ............... 76,025 76,191
-------- --------
$161,158 $164,758
======== ========
Payable to affiliates at June 30, 1998 and December 31, 1997 consisted primarily
of unpaid property management fees, disposition fees, Partnership general and
administrative expenses and asset management fees and are due and payable from
current operations.
NOTE 5.
- -------
The Partnership's mortgage loan investments - affiliate were secured by first
and second liens on Fort Meigs Plaza Shopping Center, which was owned by an
affiliate of the General Partner. On April 20, 1998, Fort Meigs Plaza was sold
to a non-affiliate for a gross sales price of $3.8 million. The Partnership
received $3,615,353 as payment in full for both principal and interest
receivable on the loans, which represents the available cash proceeds from the
sale of the property.
NOTE 6.
- -------
The mortgage loan investment secured by Idlewood Nursing Home matured in
February 1998. On May 1, 1998, the Partnership received $2.4 million from the
borrower as payment in full for both principal and interest receivable on the
loan (the actual balance of the loan was greater than the book value). Since the
Partnership owned an 83% participation interest in the note, $408,000 of the
$2.4 million settlement was paid to the owner of the remaining 17% of the note.
As a result of this transaction, the Partnership recognized a $1,025,833 gain on
extinguishment of mortgage loan investment, which represents the net cash
received in excess of the book value of the loan.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
There has been no significant change in the operations of Sterling Springs
Apartments; 1130 Sacramento Condominiums was sold in August 1997.
The Partnership reported net income of $1,153,169 for the first six months of
1998 as compared to $76,262 for the same period in 1997. Revenues in 1998
increased to $2,004,819 from $888,405 in 1997, while expenses were $851,650 in
1998 as compared to $812,143 in 1997.
Net cash provided by operating activities was $420,908 for the six months ended
June 30, 1998. The Partnership expended $20,869 for capital improvements, made
$30,366 in principal payments on its mortgage note payable and distributed
$1,482,316 to the limited partners. After receiving a total of $5,622,902 of
principal on mortgage loan investments and mortgage loan investments -
affiliate, cash and cash equivalents totaled $6,334,552 at June 30, 1998, a net
increase of $4,510,259 from the balance at December 31, 1997.
RESULTS OF OPERATIONS
- ---------------------
Revenue:
Total revenue increased by $1,029,436 and $1,116,414 for the three and six
months ended June 30, 1998, respectively, as compared to the same periods in
1997. The increase was mainly due to a gain on extinguishment of mortgage loan
investment, as discussed below.
In 1993, the Partnership acquired a second lien loan on a property owned by an
affiliate. The Partnership purchased the first lien loan on this property in
December 1997. Both loans were repaid by the borrower in April 1998. Interest
income on mortgage loan investments - affiliate decreased by $15,305 and
increased by $77,772 for the three and six month ended June 30, 1998,
respectively, as compared to the same periods in 1997. The overall increase was
due to the first six months of 1997 including interest on the second lien loan
only. 1998 includes interest on both the first and second lien loans. The
decrease in the second quarter was due to both of the loans being repaid in
April 1998.
The first and second quarters of 1997 include interest on the second lien loan
only. The first quarter of 1998 includes interest on both the first and second
lien loans. No interest income related to these loans was recorded in the second
quarter of 1998 as it was determined to be uncollectible.
Other interest income increased by $30,202 and $15,312 for the three and six
months ended June 30, 1998, respectively, as compared to the same periods in
1997. The increase was the result of an increase in cash available for
short-term investment in the second quarter of 1998 due to payoff of the
Idlewood Nursing Home mortgage loan investment and the Fort Meigs Plaza mortgage
loan investments - affiliate.
<PAGE>
In the second quarter of 1998, the Partnership recognized a $1,025,833 gain on
extinguishment of mortgage loan investment related to the payoff of the Idlewood
Nursing Home loan. The gain represents the cash payoff received in excess of the
book value of the mortgage loan investment. No such gain was recognized in the
first six months of 1997.
Expenses:
Total expenses for the three and six month periods ended June 30, 1998 increased
by $90,671 and $39,507, respectively, as compared to the same periods in 1997.
The increase was mainly due to an increase in general and administrative
expenses, partially offset by decreases in depreciation, property taxes, repairs
and maintenance and other property operating expenses, as discussed below.
Depreciation expense for the three and six months ended June 30, 1998 increased
by $355 and decreased by $25,787, respectively, in relation to the same periods
in 1997. The overall decrease was due to 1130 Sacramento Condominiums being
classified as an asset held for sale by the Partnership effective April 15,
1997. In accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Partnership
ceased recording depreciation on the asset at the time it was placed on the
market for sale.
Property taxes decreased by $3,774 and $11,301 for the three and six month
periods ended June 30, 1998, respectively, in relation to the same periods in
1997, mainly due to the sale of 1130 Sacramento in the third quarter of 1997.
Repairs and maintenance expense increased by $8,920 for the three months and
decreased by $12,030 for the six months ended June 30, 1998 as compared to the
same periods in 1997. The overall decrease was mainly attributable to 1130
Sacramento, which was sold in August 1997. This decrease was partially offset by
an increase in costs incurred to maintain the appearance of Sterling Springs
Apartments in the second quarter of 1998 in an effort to increase occupancy.
In the three and six months ended June 30, 1998, other property operating
expenses decreased by $2,658 and $9,982, respectively, as compared to the same
periods in 1997. The decrease was mainly due to a $5,000 deductible paid by the
Partnership in the first quarter of 1997 for a minor tenant claim settled by the
Partnership's insurance carrier.
General and administrative expenses increased by $93,085 and $106,736 for the
three and six months ended June 30, 1998, respectively, in relation to the same
periods in 1997. The increase was mainly due to costs incurred to explore
alternatives to maximize the value of the Partnership (see Liquidity and Capital
Resources).
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership generated $420,908 of cash through operating activities for the
first six months of 1998 as compared to $158,116 generated during the first six
months of 1997. The increase in 1998 was partially due to an increase in
interest received from an affiliate relating to the Fort Meigs Plaza loan (see
discussion of increase in interest income on mortgage loan investments -
affiliate, above). In addition, there was a decrease in cash paid to affiliates
in 1998.
<PAGE>
In May 1998, the Partnership received a net $1,992,000 from the borrower as
payment in full for both principal and interest receivable on its 83%
participation interest in the Idlewood Nursing Home mortgage loan investment.
In April 1998, the Partnership received $3,570,896 to payoff the principal
balance of the Fort Meigs Plaza mortgage loan investments - affiliate.
The Partnership distributed $1,482,316 and $749,994 to the limited partners
during the six months ended June 30, 1998 and 1997, respectively. In light of
the discussions relating to the sale transaction as disclosed, the Partnership
is presently deferring any decision with respect to the amount or timing of
distributions to limited partners.
Short-term liquidity:
At June 30, 1998, the Partnership held cash and cash equivalents of $6,334,552.
This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its remaining property.
In 1998, the operation of Sterling Springs Apartments, the Partnership's only
remaining property, is expected to provide sufficient positive cash flow for
normal operations. Management will perform routine repairs and maintenance on
the property to preserve and enhance its value and competitiveness in the
market. Capital improvements to the Partnership's property in 1998 are expected
to be funded from operations of the property.
The mortgage loan investment secured by Idlewood Nursing Home matured in
February 1998. On May 1, 1998, the Partnership received $2.4 million from the
borrower as payment in full for both principal and interest receivable on the
loan (the actual balance of the loan was greater than the book value). Since the
Partnership owned an 83% participation interest in the note, $408,000 of the
$2.4 million settlement was paid to the owner of the remaining 17% of the note.
The first and second lien mortgage loan investments - affiliate secured by Fort
Meigs Plaza matured in March 1998 and September 1997, respectively. The
borrowing partnership sold the property to a non-affiliate in April 1998 for
$3.8 million. The Partnership received $3,615,353 as payment in full for both
principal and interest receivable on the loans.
For 1998, management expects that cash from operations of its property and
principal and interest collections on the mortgage loan investments, along with
the present balance of cash and cash equivalents held, will allow the
Partnership to meet its obligations as they come due.
Long-term liquidity:
The Partnership's property, Sterling Springs Apartments, is encumbered with
mortgage debt. The mortgage is not due until 2003.
While the outlook for maintenance of adequate levels of liquidity is favorable,
should operations deteriorate and present cash resources be insufficient for
current needs, the Partnership would require other sources of working capital.
No such sources have been identified. The Partnership has no established lines
of credit from outside sources. Other possible actions to resolve cash
deficiencies include refinancings, deferral of capital expenditures on the
Partnership's property except where improvements are expected to increase the
competitiveness and marketability of the property, arranging financing from
affiliates or the ultimate sale of the property.
<PAGE>
As previously announced, the Partnership has retained PaineWebber
("PaineWebber"), Incorporated as its exclusive financial advisor to explore
alternatives to maximize the value of the Partnership including, without
limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The Partnership, through PaineWebber, has
provided financial and other information to interested parties and is currently
conducting discussions with one such party in an attempt to reach a definitive
agreement with respect to a sale transaction. It is possible that the General
Partner and its affiliates will receive non-cash consideration for their
ownership interests in connection with any such transaction. There can be no
assurance that any such agreement will be reached nor the terms thereof.
Forward-Looking Information:
Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after June 30, 1998. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate the sale or refinancing of its
property, collect payments on its mortgage loan investment and respond to
changing economic and competitive factors.
Other Information:
Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at its property. The Partnership also intends to
communicate with suppliers, financial institutions and others to coordinate year
2000 issues. Management believes that the remediation of any outstanding year
2000 conversion issues will not have a material or adverse effect on the
Partnership's operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
James F. Schofield, Gerald C. Gillett, Donna S. Gillett, Jeffrey Homburger,
Elizabeth Jung, Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors, Inc., McNeil Real Estate Management, Inc., Robert A. McNeil,
Carole J. McNeil, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund XI,
Ltd., McNeil Real Estate Fund XII, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P., McNeil Real Estate Fund XXII, L.P., McNeil Real Estate
Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII, L.P., et al. - Superior Court of
the State of California for the County of Los Angeles, Case No. BC133799 (Class
and Derivative Action Complaint).
The action involves purported class and derivative actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.
Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated and
amended complaint in all respects. A hearing on Defendant's demurrer and motion
to strike was held on May 5, 1997. The Court granted Defendants' demurrer,
dismissing the consolidated and amended complaint with leave to amend. On
October 31, 1997, the Plaintiffs filed a second consolidated and amended
complaint. The case has been stayed pending settlement discussions. While
actively working toward a final resolution, there can be no assurances regarding
settlement.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits.
Exhibit
Number Document Description
-------- ---------------------
4. Amended and Restated Limited Partnership
Agreement dated March 30, 1992.
(Incorporated by reference to the Current
Report of the registrant on Form 8-K dated
March 30, 1992, as filed on April 10, 1992).
11. Statement regarding computation of Net
Income per Limited Partnership Unit: Net
income per limited partnership unit is
computed by dividing net income allocated to
the limited partners by the weighted average
number of limited partnership units
outstanding. Per unit information has been
computed based on 49,512 limited partnership
units outstanding in 1998 and 1997.
27. Financial Data Schedule for the quarter
ended June 30, 1998.
(b) Reports on Form 8-K. A Form 8-K with respect to Item 2 dated April 20,
1998 was filed on May 5, 1998 regarding the payoff of the Fort Meigs
Plaza mortgage loan investments - affiliate and the Idlewood Nursing
Home mortgage loan investment.
<PAGE>
MCNEIL REAL ESTATE FUND XX, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
McNEIL REAL ESTATE FUND XX, L.P.
By: McNeil Partners, L.P., General Partner
By: McNeil Investors, Inc., General Partner
August 14, 1998 By: /s/ Ron K. Taylor
- --------------- -----------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)
August 14, 1998 By: /s/ Carol A. Fahs
- --------------- -----------------------------------------
Date Carol A. Fahs
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,334,552
<SECURITIES> 0
<RECEIVABLES> 27,866
<ALLOWANCES> 0
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<CURRENT-ASSETS> 0
<PP&E> 4,295,427
<DEPRECIATION> (1,410,186)
<TOTAL-ASSETS> 11,730,981
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<BONDS> 2,640,692
0
0
<COMMON> 0
<OTHER-SE> 8,657,072
<TOTAL-LIABILITY-AND-EQUITY> 11,730,981
<SALES> 646,880
<TOTAL-REVENUES> 2,004,819
<CGS> 315,789
<TOTAL-COSTS> 435,026
<OTHER-EXPENSES> 294,326
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,298
<INCOME-PRETAX> 1,153,169
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